Medical Practices and Health Insurers Must Use New Federally Mandated Medical Codes, Which Bring Added Expense

By Susan Jones | February 7, 2011 | 9:45 AM EST

President Barack Obama shakes hands with doctors after making remarks on health care reform at the White House on Oct. 5, 2009. (AP Photo/Gerald Herbert, file)

( - U.S. health care providers and health plans have two years left to adopt a new federally mandated system of medical coding--the shorthand used to list what's wrong with a patient and how much that patient should be charged.

The new, vastly expanded coding system is intended to improve disease management, disease monitoring, and health care reimbursement.

This will be the first major overhaul of the medical coding system in 30 years, and it is separate from the government’s push to have health care providers switch from paper records to electronic health records.

While the Health and Human Services Department (which issued the regulatoins for the coding system) is offering millions of dollars in grants to help medical practices adopt electronic health records, there is no federal funding for the computer upgrades needed to accommodate the new medical coding.

A number of U.S. companies are stepping up to advise medical practices about the “intricacies” involved in switching to the new medical codes, which have a different format and longer length than the current codes.

"The new standard will significantly expand the number of codes in use, enabling payers and providers to address a wider variety of conditions with far more specificity," Ernst & Young LLP and 3M Health Information Systems said in a news release announcing their upcoming Web cast for medical practitioners.

The transition brings "new complexity," the companies said, as the number of diagnostic codes will increase from 17,000 available today to more than 140,000 under ICD-10.

(ICD-10 stands for International Classification of Diseases, 10th Revision. There are two code sets. ICD-10-CM contains diagnosis codes; and ICD-10-PCS contains hospital inpatient procedure codes.)

"ICD-10 will touch every aspect of health care operations and patient care, so it's critical that organizations have a comprehensive transition plan," said Garri Garrison of 3M Health Information Systems in a news release.

The ICD regulations -- finalized in January 2009, in the last days of the Bush administration -- "will move the nation toward a more efficient, quality-focused health care system by helping accelerate the widespread adoption of health information technology,” said then-HHS Secretary Mike Leavitt.

The current coding system is outdated, because of its limited ability to accommodate new procedures and diagnoses, the government says.

HHS said adoption of the ICD-10 code sets will "accurately define services" and provide specific diagnosis and treatment information, such as identifying cases of MRSA and other specific conditions, and it will help detect and prevent Medicare abuses.

The new, expanded system will "ensure more accurate payments for new procedures, resulting in fewer rejected claims, improved disease management, and harmonization of disease monitoring and reporting worldwide."

And it will allow the United States to compare its data with international data to track the incidence, spread, and treatment of disease. The U.S. is one of the few developed countries not using ICD-10, which was developed by the World Health Organization.

The American Medical Association calls the transition to ICD-10 a "significant change" for the health care community that should be addressed immediately.

The AMA said the changes needed to accommodate the ICD-10 codes "are potentially a large expense," involving IT upgrades, staff training, and vendor hiring in many cases.

The transition also may affect billing: Payments could be delayed or denied in cases where clearinghouses and billing services do not convert to the new coding system and the software needed to support it.

Before converting to the new ICD coding system, medical practices, hospitals and other health care entities must first update the software needed to conduct routine electronic transactions.

Providers, including physicians, must have the so-called 5010 software upgrade installed by January 1, 2012. The implementation date for ICD-10 is October 1, 2013.